Britons, beginning to mourn the loss of their beloved sovereign, have long mourned another rock in their country, a thriving economy.
Posted at 6:00 am
How did a country that was the cradle of modern capitalism and the industrial revolution become such an economic and political disaster? he recently wondered The economist.
Bad news continues to pile up on the economic front in the UK, which is headed straight for a deep recession. The country was still recovering from years of strife before and after leaving the European Union when war broke out in Ukraine.
The resulting energy crisis is a disaster for Brits, who are islanders and do not have the same options as the rest of Europe to cushion rising energy prices.
UK household energy bills, which have doubled over the past year, continue to rise. Another 80% increase was announced for the 1stah October, forcing the UK government to respond with another massive cash injection to soften the blow.
Prime Minister Liz Truss, who has just succeeded Boris Johnson, had to back down fairly quickly. She, who had clearly spoken out against direct state aid because it would not solve the basic problems, must do exactly the opposite.
Days after arriving at 10 Downing Street, the new Prime Minister announced an unprecedented aid package to help Britons cope with soaring energy prices. This will be capped for two years to calm inflation.
The cost of these relief measures, which come on top of those already introduced by the previous government and have quickly proved insufficient, has not been disclosed. But we know it will be expensive. According to estimates by Times from London, the bill would total £150 billion (CAN$227 billion), double the public aid the government has given workers during the pandemic.
Inflation at 22%?
The supply problems caused by the post-Brexit chaos had already pushed up the cost of living in the UK faster than anywhere else in Europe. The Bank of England, which last year became the first of the major central banks to raise interest rates, is having to work twice as hard to fight inflation, which currently exceeds 10%.
The Bank of England postponed its rate decision, which was due to be announced last week, due to the death of Elizabeth II, but another hike is expected. In its most recent announcement in August, the bank acknowledged that inflationary pressures had increased and that official inflation will reach 13% this autumn. A recession is inevitable, the Bank of England predicts, and it could last a long time.
If the energy crisis lasts longer, the inflation rate could rise to over 22%, according to economists including those at Goldman Sachs.
The decline in the UK economy is reflected in the value of the British currency, which recently hit a 37-year low against the US dollar and continues to depreciate against the euro.
The new prime minister is entering a field of rubble and promising to get the country back on the road to prosperity. Her main recipe is to cut taxes and duties, as a worthy admirer of Margaret Thatcher, whom she claims to be.
Liz Truss has already announced that she will lift the moratorium on hydraulic fracturing and encourage oil exploration in the North Sea to increase security of oil and gas supplies.
Like many other countries, the UK has committed to becoming carbon neutral by 2050. Upon arrival, the prime minister said she wanted to review the 2050 target of carbon neutrality “to make sure it doesn’t put too much strain on businesses and consumers,” she publicly stated.
We shouldn’t have to choose between the environment and the economy. When that happens, business often wins.